The Federal Reserve is making modest progress in its push to reduce the
unemployment rate. But that is not the jobs goal Congress actually
established for the Fed. The central bank is supposed to be maximizing
employment. And on that front, it is not making progress.

Applelbaum points to the employment to population ratio as evidence that the
Fed is falling short of the mandate. But are Fed officials ready to do more?
No:

There is little sign, however, that Fed officials are considering an
expansion of their four-year-old stimulus campaign as the Fed’s
policy-making committee prepares to convene Tuesday and Wednesday in
Washington.

Applelbaum notes that the recent flow of data has forced monetary policymakers
to back away from talk of ending large scale assets purchases. But among the
reasons to avoid expansion of the program we find this:

Another reason the Fed is not embracing new measures is that it already
has tied the duration of low interest rates to the unemployment rate. The
Fed said in December that it intended to hold interest rates near zero at
least as long as the unemployment rate remained above 6.5 percent, provided
that inflation remained under control. The theory is that the economy will
get as much stimulus as it needs.

But what if the inflation rate is persistently below the target? Or, worse,
trending lower? Clearly then the economy is not getting the stimulus it needs.
If we are missing on both targets, then the economy needs more stimulus. And
while we can debate the efficacy of monetary policy in influencing the pace of
employment growth, surely monetary policy can influence the inflation rate.
Correct?

The distressing part of this article is that it reads as if the Fed has given
up not only on its ability to influence the pace of employment growth, but also
on its ability to influence the inflation rate. Or, possibly worse, that the
Fed is simply no longer concerned with the inflation rate now that the obvious
threat of deflation has passed. This again feeds suspicion that the Fed's 2
percent target is really an upper bound.

Bottom Line: The Fed is supposed to have a dual mandate. Dual, as in two.
Maximum employment and price stability. One would think that failing at the
latter would be at least as important as failing at the former. Perhaps we are
learning that the Evan's rule is flawed - it should not be about only conditions
before which the Fed considers removing stimulus, but also conditions by which
the Fed deliberately considers adding additional stimulus. A two-side Evan's
rule is needed.

The Federal Reserve is making modest progress in its push to reduce the
unemployment rate. But that is not the jobs goal Congress actually
established for the Fed. The central bank is supposed to be maximizing
employment. And on that front, it is not making progress.

Applelbaum points to the employment to population ratio as evidence that the
Fed is falling short of the mandate. But are Fed officials ready to do more?
No:

There is little sign, however, that Fed officials are considering an
expansion of their four-year-old stimulus campaign as the Fed’s
policy-making committee prepares to convene Tuesday and Wednesday in
Washington.

Applelbaum notes that the recent flow of data has forced monetary policymakers
to back away from talk of ending large scale assets purchases. But among the
reasons to avoid expansion of the program we find this:

Another reason the Fed is not embracing new measures is that it already
has tied the duration of low interest rates to the unemployment rate. The
Fed said in December that it intended to hold interest rates near zero at
least as long as the unemployment rate remained above 6.5 percent, provided
that inflation remained under control. The theory is that the economy will
get as much stimulus as it needs.

But what if the inflation rate is persistently below the target? Or, worse,
trending lower? Clearly then the economy is not getting the stimulus it needs.
If we are missing on both targets, then the economy needs more stimulus. And
while we can debate the efficacy of monetary policy in influencing the pace of
employment growth, surely monetary policy can influence the inflation rate.
Correct?

The distressing part of this article is that it reads as if the Fed has given
up not only on its ability to influence the pace of employment growth, but also
on its ability to influence the inflation rate. Or, possibly worse, that the
Fed is simply no longer concerned with the inflation rate now that the obvious
threat of deflation has passed. This again feeds suspicion that the Fed's 2
percent target is really an upper bound.

Bottom Line: The Fed is supposed to have a dual mandate. Dual, as in two.
Maximum employment and price stability. One would think that failing at the
latter would be at least as important as failing at the former. Perhaps we are
learning that the Evan's rule is flawed - it should not be about only conditions
before which the Fed considers removing stimulus, but also conditions by which
the Fed deliberately considers adding additional stimulus. A two-side Evan's
rule is needed.